Whistle-blowers find cold reception despite critical role they play

NEW YORK – Many whistle-blowers who exposed corporate scandals in recent years are getting the cold shoulder from former and potential employers, despite the attention given to the critical role they can play in stamping out such malfeasance.
Congress passed legislation protecting employees who expose corporate wrongdoing, and the media have given accolades – Time magazine featured three as its top people for 2002.
But in the corporate world, they are still largely frozen out, often either fired or harassed out of their jobs.
Once they have gained some notoriety within an industry, other companies usually find excuses not to hire them, say experts who have examined a quarter century of such cases.
“Unless you are a master of diplomacy and/or manipulation, you are crossing the Rubicon when you blow the whistle,” said Tom Devine, legal director at the Government Accountability Project, which defends whistle-blowers.
Many, after being forced out of their jobs, file costly wrongful dismissal lawsuits that usually take years to resolve and often find it hard to rebuild their careers.
Roy Olofson, former vice president of finance at Global Crossing, raised concerns about the telecommunication company’s accounting and financial reporting in mid-2001, the year before it crashed into bankruptcy.
Global Crossing said at the time it found no evidence to support his claims, then terminated Olofson’s employment in November 2001 as part of a workforce reduction.
Olofson, claiming he was fired, brought a wrongful termination suit against the company. His lawyer, Brian Lysaght, did not return repeated calls for comment, and a Global Crossing spokeswoman said the suit had been stayed because of the company’s Chapter 11 proceedings.
Xerox Corp.’s former assistant treasurer, James Bingham, made accounting and financial reporting allegations against Xerox in 2000 and went on to assist the Securities and Exchange Commission in a civil case that the company eventually settled, but he may never get a similar job at a big company and still awaits a decision on his wrongful dismissal suit.
“Jim had a great career, but he’ll never get a job in corporate America again,” said David Golub, Bingham’s lawyer.
Xerox spokesman Bill McKee declined to comment, calling the case “past history.”
The employee who anonymously tips off a company or the authorities about shenanigans isn’t always better off either.
Accounting fraud allegations at retailers Kmart Corp. and Ahold, were first reported in anonymous letters. In both instances, investigations were conducted.

The lucky few
A small minority do avoid being blacklisted, say experts.
“There are some folks that do get rehired within industry. An employer selects them as a showcase of corporate standards,” said Devine.
Sherron Watkins, whose much publicized memo to then Enron Corp. Chairman Kenneth Lay was an attempt to draw attention to the company’s shaky finances, said in a phone interview that she will consider a corporate position if a board consulting venture she is pursuing does not pan out.
“It’s not going to work unless I get a gunslinger in securities law and a big-name advisory board,” said Watkins. “If it does not appear like what’s needed for success, then I probably will take a corporate job.”
Watkins said an insurance broker recently approached her about a high-level executive position, which would allow her to continue speaking on corporate ethics.
Typically, however, few whistle-blowers stay in the corporate world, say experts who have helped them find new jobs. Most go on to work for advocacy groups or go back to law school to defend the next generation of whistle-blowers.
“They become professional whistle-blowers. It’s very hard to walk away and start something else,” said C. Fred Alford, a professor of government at the University of Maryland and author of “Whistle-blowers: Broken Lives and Organizational Power.”
One executive who did retain her position despite exposing a massive fraud was MCI’s vice president of audit, Cynthia Cooper, who brought the telecommunications company’s $11 billion manipulation of its accounts to light.
She remains at MCI, still known legally as WorldCom Inc., with the same title and responsibilities, though a spokesman declined to make Cooper available for an interview citing the “highly charged atmosphere here.”
It takes time for companies to move beyond the suspicion and distrust associated with whistle-blowers, say experts.
Watkins said she avoided the “torment of the damned” because she was fully vindicated by the Enron collapse. But she says she is in a minority.
“The lesson is to keep quiet and protect yourself. It’s fine and good to be noble but unless people are dying, consider your family first. It doesn’t pay,” she said.

Lifting the Lid is a regular column from Reuters news service that sheds light on corporate governance, accounting issues, levels of disclosure, executive compensation and related topics.

Major corporate whistle-blowers
Reuters Business Report

NEW YORK – The following is a summary of some major corporate whistle-blower cases in recent years.
• COMPANY: Enron Corp.
WHISTLE-BLOWER: Sherron Watkins, former financial executive
COMPLAINT: Accounting fraud
WHAT HAPPENED: Watkins wrote a memo in late summer 2001, alleging a financial house of cards was used in congressional testimony examining Enron’s collapse. Watkins stayed on at Enron until November 2002 but said she was shuffled around and treated like a “pariah.” Watkins wrote a book, gives lectures on corporate ethics and is launching a company offering independent advisors for corporate boards.
• COMPANY: Global Crossing Ltd.
WHISTLE-BLOWER: Roy Olofson, former vice president finance
COMPLAINT: Accounting fraud
WHAT HAPPENED: Olofson highlighted concerns about the company’s accounting in a five-page letter in August 2001. Global Crossing looked into charges but dismissed them as without merit. In November 2001, the company let Olofson go as part of a restructuring. Olofson filed a defamation and interference with contract lawsuit against key company executives. A Global Crossing spokeswoman said the suit was stayed because of the company’s Chapter 11 bankruptcy proceedings. Olofson’s lawyer did not return calls for comment.
• COMPANY: Lucent Technologies Inc.
WHISTLE-BLOWER: Nina Aversano, former president of North American sales to service provider companies
COMPLAINT: Charged that then CEO Richard McGinn set unreachable goals that led the company to mislead the public about its prospects
WHAT HAPPENED: Aversano was negotiating her severance package when Lucent’s financial results began to crumble in 2000. Aversano claimed she was fired and filed charges against the company. Aversano settled the suit in January 2003 as a breach of contract – details of the settlement are secret. Aversano has received a notice from the Securities and Exchange Commission indicating she may be the subject of a civil prosecution, according to the Wall Street Journal. Aversano declined to comment because of the terms of her settlement.
• COMPANY: Xerox Corp.
WHISTLE-BLOWER: James Bingham, former assistant treasurer
COMPLAINT: Accounting fraud
WHAT HAPPENED: Bingham brought accounting irregularities to light in 2000. His evidence was later used by federal investigators in their case against Xerox. Bingham brought a wrongful dismissal suit against Xerox, and his case continues to go through the courts. Bingham’s lawyer, David Golub, said he expects a development very soon but did not return calls seeking further details.
• COMPANY: WorldCom Inc.
WHISTLE-BLOWER: Cynthia Cooper, vice president internal audit
COMPLAINT: Accounting fraud
WHAT HAPPENED: Cooper is credited with uncovering a massive accounting fraud that forced WorldCom to file for bankruptcy. She remains in her job, but a company spokesman declined to make her available for comment.